Interpretive Opinion No. 71 / 11F

State of California Department of Corporations

Anthony R. Pierno, Commissioner
In reply refer to: File No. _____

This interpretive opinion is issued by the Commissioner of Corporations pursuant to section 31510 of the franchise investment law. It is applicable only to the transaction identified in the request therefor, and may not be relied upon in connection with any other transaction.

Mr. Donald K. Garner
Attorney at Law
Hill, Farrer & Burrill
34th Floor, 445 South
Figueroa Street
Los Angeles, CA, 90017

Dear Mr Garner:

The request for an interpretive opinion contained in your letter dated February 22, 1971, as supplemented by your letter dated February 26, 1971, has been considered by the Commissioner. In these letters you have raised the question whether the offer and sale by Harry O. Hamm as subfranchisor of franchises granted by Dale Carnegie Courses, under the circumstances described and assumed by you, is exempt from the registration requirement of section 31110 of the Franchise Investment Law by virtue of Section 31101 of the Law. In our opinion, on the assumptions stated below, this question must be answered in the affirmative.

In your letter of February 26, 1971, you have represented that Mr. Hamm is the licensed "Sponsor" for the Dale Carnegie Courses in seven counties of California, and incidentally you also raise the question whether he is to be considered as a "subfranchisor" within the meaning of Section 35009 of the Law, a fact which, as assumed in your earlier letter.

Section 31009 defines a "subfranchisor" to mean a person to whom an area franchise is granted, and Section 31008 defines "area franchise" to mean any contract or agreement between a franchisor and a subfranchisor whereby the subfranchisor is granted the right, for consideration given in whole or in part for such right, to sell or negotiate the sale of franchises in the name of or on behalf of the franchisor.

On the basis of the facts disclosed to us, we cannot determine whether Mr. Hamm is a "subfranchisor", and for the purpose of the question raised in your letter dated February 22, 1971, as stated in the first paragraph of this opinion it is unnecessary to make that determination. If Hamm is not a subfranchisor, he need not register the Dale Carnegie Course franchises.

Section 31110 imposes a registration requirement upon the offer or sale of franchises in this state on or after April 15, 19 71, unless an exemption is available. Section 31101 provides an exemption from that requirement, if the standards set forth in that Section are met by the franchisor and/or its parent. You have asked us to assume and therefore, for the purpose of this opinion, we do assume that Dale Carnegie Courses, the franchisor, qualifies for the exemption, by compliance we assume with the requirements of Subdivisons (a), (b) and (c) of the Section.

On that assumption, the offer and sale of the franchises is exempt and neither the franchisor nor any subfranchisor need register the offer or sale of these franchises.

Dated: San Francisco, California
March 10, 1971

By order of ANTHONY R. PIERNO
Commissioner of Corporations

By __________________

HANS A. MAT'TES
Assistant Commissioner
Office of Policy